Don’t rush to drive that new car home

3/28/2013

By Attorney General Roy Cooper

Buying a new or used car can be an exciting time, but it’s important for consumers to be aware of potential pitfalls before they drive their new car off the lot.

Motor vehicles, including purchases and repairs, made the list of top consumer complaints to my office yet again in 2012. One practice consumers complain about is called a conditional delivery sale. Also known as spot delivery sales, these sales allow consumers to drive their new car off the lot before the financing has been finalized. What many people fail to realize is that if the financing falls through, the dealership can and will take the vehicle away from them.

These sales occur most often when loan underwriters aren’t available, at night or on weekends and holidays. Dealers may be eager to push ahead with the sale rather than waiting a day or two because buyers could change their minds or shop for a better deal. Under state law, dealerships are permitted to make conditional delivery sales, but only if they make no misrepresentations that the financing has been finalized, keep the car on their own insurance policy, and allow the buyer to drive the car away on dealer tags.

Problems arise when dealers wait too long to let the buyer know about problems with their financing. State law gives the dealer 96 hours to work out the financing. But we’ve heard from consumers who’ve been told their financing has fallen through more than a month after the sale, long after they’ve gotten their own insurance and tags for the vehicle. If the buyer refuses to agree to new, usually less-favorable terms for financing, the dealer threatens to take back the vehicle.

While the dealer is allowed to take the car back, the buyer is entitled to get their trade-in and their down payment back. If the trade-in vehicle has already been sold, the dealership should repay the consumer for it.

Conditional delivery sales may work for some buyers, but in general you’re better off not rushing to drive your new car off the lot. If you’re in the market for a new car, protect yourself with these tips:

Arrange your own financing before you go to buy a car. Go to your local bank, credit union or apply online to shop around for the best loan you can get. This will save you trouble and give you more control over the car buying process.

If you finance through the dealer, ask for written proof that the loan has been officially approved. If they can't or won't provide you with this proof, then don't take the car.

Keep track of any money you have invested in the purchase, including registration, insurance, down payment and trade. Never pay cash and always get a receipt!

A finance document showing payments, deposit, interest rate and other financial items is a binding contract, giving you specific rights.

If you agree to a conditional delivery sale, ask whether the dealership charges a fee for mileage if the vehicle must be returned because financing falls through.

Take a trusted friend with you when you shop for cars to witness whatever the dealer tells you, and get all promises in writing.

Check out the dealership or finance company with my Consumer Protection Division by calling 1-877-5-NOSCAM toll-free in NC.